Holly Wharton, Associate Analyst
Paul Topping, Analyst
For many years, Seattle has been among the most expensive metropolitan areas in the U.S. to purchase a home, led by the city of Seattle itself. This has led many Seattleites to opt for renting small apartments rather than buying houses to be able to live closer to the downtown core with employment and entertainment nearby. While the cost of living in the Seattle area remains quite high compared to other similar sized U.S. cities, there may be some relief ahead in the housing market.
The more you think about it, the reason for the sudden price decreases isn’t that much of a mystery. Inventory had been steadily increasing since the beginning of 2018 and the looming announcement of Amazon’s HQ2 appears to have affected buyers’ willingness to take the plunge into homeownership. On top of that, home prices in Seattle have been soaring for years, becoming unaffordable for a large cross section of buyers. In addition to rising interest rates, it appears that sellers are finally ready to dial down aggressive listing prices in order to attract buyers. Some note that the last time home prices in Seattle fell was during the recession ten years ago. Could these falling house prices be an indicator of the next economic downturn? We think that is unlikely given that employers in the Puget Sound continue to hire, and the slowdown in sales is likely to get new buyers back into the market. The trend over the holidays is likely to continue downward or stabilize when it is typical for home buying to slow. The real test will come in spring when both the sales volumes and listings usually pick up.
While the prices are currently slipping, it is important to understand that they are still up considerably for the year. There is a lack of homes in the lower and middle of the market and with limited land to build upon and combined with employment and population growth, don’t expect the market to get hit hard just yet.